I just finished re-reading Murder by the Book. Written in the 1950’s by Rex Stout, the Nero Wolfe novel deals with four deaths and what a certain book (“Put Not Your Trust”) has to do with them. If you’ve never read Stout, do so—he’s a wonderful author, and the books written many years ago are still eminently readable.
Coincidentally, two sham trusts crossed my email in-basket this evening. From Kenai, Alaska comes yet another dentist who allegedly decided that a sham trust was a good way to cut his taxes. Here’s the alleged scheme according to the Department of Justice.
The accused, Glenn Lockwood, formed a professional corporation. No problem so far. Then he allegedly contracted his services to an Irish company. That company allegedly leased his services to a Nevada company which, in turn, allegedly leased his services back to his own corporation. Of course, the money took a much more convoluted path, with offshore accounts, Nevada real estate development, and sham trusts supposedly thrown into the mix. The DOJ alleges that the loss to the Treasury is $575,000 for tax years 2000-2003. Mr. Lockwood will face four counts of tax evasion, and is looking at ClubFed if found guilty.
Meanwhile, in North Carolina, the DOJ has filed a civil lawsuit accusing two men of creating sham trusts to help customers evade taxes. The accused, Alexander Klosek and Bryan Noel, allegedly targeted wealthy and elderly individuals and attempted to get them to sell their homes and other major assets into sham trusts. It appears to be a pretty big alleged crime; the DOJ estimates the loss to the Treasury at $55 million. The DOJ has asked for an injunction to stop the individuals from selling any more trusts. And you can be fairly certain that a request for their customer list will soon follow so that the IRS can send a heartwarming “Dear Valued Taxpayer” letter to Klosek’s and Noel’s customers.
In the end, the best kinds of sham trusts are the ones you read about in novels. They cost you $5.95 or so for a paperback. The crimes described above, if proved, could lead to much larger penalties.